The Oil Crisis

Presented by:

Max Snitkovsky

Chris Zientek

March 18th, 2009

Hypothesis

• H0: β1≈ β2

– Where β1= Correlation of oil prices and DJIA between 1986-present

– Where β2= Correlation of oil prices and DJIA between January 2007- July 2008

• The correlation between oil prices and stock market prices during incline of the oil spike are similar to the historical correlation

β=-.05R Squared= .002

Gulf War

Oil Oversupply

Southwest Hedging

• 2007 was 95% hedged at $50/barrel

• 2008 was 65% hedged at $49/barrel

• 2009 is over 50% hedged at $51/barrel

• 2010 is over 25% hedged at $63/barrel

• 2011 is over 15% hedged at $64/barrel

• 2012 is 15% hedged at $63/barrel

Percentage Price Changes

1986 - present

β= -.013R Squared= .0006

β=.044R Squared= .0039

Questions?